Berkeley reiterates outlook: ‘a different beast to many of its competitors’

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on Sep 8, 2023
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  • Berkeley reiterated its profit guidance for FY24 and FY25 today.
  • Interactive Investor analyst commented on its trading update.
  • Berkeley shares are currently down 12% versus their YTD high.

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Berkeley Group Holdings PLC (LON: BKG) ended roughly flat on Friday even though it reported a 35% year-on-year decline in reservations on political and macroeconomic uncertainty.

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Why did Berkeley shares remain resilient today?

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Its shares held their own primarily because the management backed its future outlook.

Berkeley remains committed to at least £1.05 billion ($1.31 billion) of combined pre-tax profit in its fiscal 2024 and fiscal 2025. According to Richard Hunter – Head of Markets at Interactive Investor:

Berkeley is a different beast to many of its competitors, with a potential edge coming from its mix of exposure to London and South East, higher-end properties, and regeneration of brownfield sites.

Berkeley shares are currently down about 12% versus their year-to-date high.

Berkeley has a solid balance sheet

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Berkeley also confirmed this morning that constrained supply is helping pricing remain resilient.

Enquiries and cancellation rates have been relatively stable as well, it added. Still, Interactive Investor’s Hunter cautioned today in a research note:

Berkeley is far from being immune to the wider issues of mortgage availability and affordability, planning bottlenecks, uncertain consumer propensity to buy and a cloudy outlook.

He did applaud the homebuilder’s dividend policy and broader strength of its balance sheet, though.

What else was noteworthy in the trading update?

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Berkeley has exchanged over 90% of its FY24 revenue and expects about £2.0 billion due on forward sales at October 31st.

Note that Berkeley did not buy any land recently and plans on investing in new opportunities only selectively, as per its trading update.  

Complexity and protracted nature of current planning system and lack of clarity surrounding certain regulatory changes … continue to deter investment into brownfield regeneration and wider sector.

Earlier this week, peer Barratt Developments reported a 16% decline in annual profit (find out more).

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